2017 Asset Class Returns: How Do They Stack Up?

July 14, 2017

2017 Asset Class Returns This Year

As we look back on the first half of 2017, below are a few key takeaways:

  1. International stocks are top-performers. Emerging markets stocks are up over 17% (think China, India, Brazil, and Russia). International stocks are up over 14% (think Western Europe, Japan, and Australia).
  2. Market returns do not necessarily correlate to economic stability. Concerns and challenges in Europe are not widespread. Political instability, the future of the Euro, immigration challenges, terrorism, and the burden of heavy debt plague much of the area. But despite the challenges, stocks have surged. During times of challenge, we ought to remember a quote by Warren Buffett: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”
  3. Bonds are hanging in, despite modest interest rate increases. U.S. bonds are up over 2%. In an environment with modest interest rate increases, this is worth mentioning. Generally speaking, bonds have an inverse relationship with interest rates. When interest rates increase, bond values typically decline.

One of the key conclusions that we draw when looking at how the stock and bond markets perform over time is the importance of diversifying one’s investment assets. No asset class stays at the top. There is a constant rotation in what is performing well during any given year. And we believe that the most prudent and likely way to generate desirable risk-adjusted returns is to maintain diversification across asset classes. Note that the chocolate box you see on this chart represents a “Moderate Growth” style of investing. It diversifies across the various asset classes listed and historically can create a more consistent return.